I just finished episode four which ends with Karen kicking the shit out of lip. The next episode's recap shows Sheila nearly being destroyed by part of a plane and then there is talk of Karen being pregnant. When did this happen? Is the internet missing an episode or something?

I had the same problem. I would usually stop watching once the credits come out but it turns out there is a short little piece that they cut to in the middle of the credits in every episode. That is where you see the airplane wheel coming down.

No. In that episode, which I believe is episode four of season two, while Karen is kicking the shit out of Lip, she tells him "stay the hell away from Jody, stay the hell away from me, and stay the hell away from this baby." and everyone looks like "Oh shit, she just said baby." and then the credits start to roll.

Now, I cannot speak for the internet, but when watching an episode live or from Showtime On Demand, after the first couple of credits, they show an extra scene which is usually a funny scene or something. However, in this episode, it shows Shelia leaving the house and a plane wheel randomly falling from the sky and killing her, causing her to go back inside and relapse with her agoraphobia, and Frank to be very happy that she won't make it down to the Alibi and find out how much of an asshole he really is.

I'm with you all the way. It seems like something that would have such a huge impact on the plot would be within the actual episode. I wonder if watching it on tv made it more obvious than with internet viewing.

Damn. It's like they want viewers to be confused. I can see why it might have been on purpose. The show is fueled by chaos so maybe that sort of lack of understanding places the viewer in a position closer to that of the character.